Carmakers Design For Generation Y

By MICHELINE MAYNARD

Published: January 16, 2003

DETROIT, Jan. 15—
The Honda Element looks like a sport utility vehicle that married a Brink's truck, with as much headroom as a Greyhound bus. Inside, Honda calls it a dormitory room on wheels, with seats that can be turned around, pulled out, folded flat, stacked with gear and hosed off.

The Toyota Scion xB seems like a time-warped homage to Chrysler's 1980's minivans, shrunken and brought down to curb level. There are no gauges in front of the steering wheel to distract the driver; they are off to the center, above an ear-blasting Pioneer stereo prewired for satellite radio.

Ye Chen, 25, a graphic designer in Brooklyn, loves the Honda. ''The Element is different,'' he said. ''It's not pretentious. It's not trying to look good. It's a box. I like it.''

But Alisha Broberg, 24, who works in sales while she finishes her college degree, hates the Scion xB. ''I think the Scion is awful,'' she wrote in an e-mail message from San Antonio. ''When did designers start thinking that boxy equals cool for the under-30 set?''

These opposite reactions hint at the gamble that auto companies are taking as they set out to sell cars to Generation Y, the under-25 group that marketers associate with extreme sports, blaring techno music and a zealous individuality.

Led by Honda and Toyota -- both otherwise known for lineups of fairly conventional-looking cars and trucks -- some automakers are building cars meant specifically for young drivers, hoping that the attempt to be cool does not brand them as hopelessly not.

Toyota's Scion is a new nameplate that will eventually house a collection of vehicles aimed at the trendiest Gen Y drivers. Honda is selling the Element at a base price just under $17,000 alongside the rest of its vehicles, where it stands out like a Frank Gehry building in an industrial park.

Others are making less severe departures, with demonstrable success. Mitsubishi, which lacked much of an identity in the 1990's, has built the youngest customer base of any auto company, not with a new vehicle but with sharp marketing. Its ads feature the music of rock bands like Barenaked Ladies. And its financing terms are extremely liberal, at times zero percent loans with nothing down and no payments for a year.

The Korean automaker Hyundai, meanwhile, has plowed the time-proven path to winning young drivers: its vehicles are among the cheapest in America, and are backed with a 10-year, 100,000-mile warranty. Sales have quadrupled over the last four years, and the age of the average Hyundai buyer has fallen to 35.8, just a few months older than the typical 35.5 of a Mitsubishi owner.

Finbarr O'Neill, chief executive of Hyundai America, is skeptical that vehicles can be aimed at an age group. ''You can slice and dice the market too thin,'' said Mr. O'Neill, banging his hand on a conference table for emphasis during an interview last week.

But most carmakers, like nearly every maker of consumer products, say their future success lies in winning the loyalties of young customers today. ''If we can capture them at 15 to 24, we can enjoy their business for years to come,'' said Fujio Cho, Toyota's president.

Toyota's research shows that while the company was successful at attracting baby boomers in the 1970's and 80's, the children of those customers consider Toyotas to be their parents' cars -- ''really uncool,'' as Mr. Chen puts it.

People of his generation bought just 5 percent of the 17.2 million cars and trucks sold in the United States last year. Within seven years, though, buyers born after 1977 will make up 25 percent of the car market, and by 2020 they will be 40 percent, according to Toyota's estimates.

Auto companies have spent decades chasing such young buyers. Ford and General Motors succeeded in the 1960's, when the Mustang and the Pontiac GTO were resounding hits with the first baby boomers who could afford to buy cars. Some other efforts may best be forgotten, like the fire-prone Ford Pinto and the bulbous AMC Pacer.

More recently, the Pontiac Aztek, a sort of minivan-sport utility amalgam, was supposed to appeal to young outdoor enthusiasts, but its thick polymer cladding and enormous rear end secured its standing as an Edsel for the new millennium.

Indeed, vehicles that auto companies say are aimed at young people often become means for parents to relive their own youth, as with Volkswagen's revived Beetle and the Toyota Matrix, both of which have been bought primarily by boomers, said Art Spinella, an industry analyst with CNW Marketing Research of Bandon, Ore.

So far, Generation Y buyers, like generations before them, have gravitated to small, relatively inexpensive models. In 2002, the top sellers in this age group in 2002 were the Honda Civic, the Volkswagen Jetta and the Chevrolet Cavalier, according to J. D. Power & Associates; all have base prices well below $20,000, compared with the average $25,000 price tag last year for a new car or truck.

But that does not mean these customers will remain satisfied with such vehicles for long. Toyota's market research has found that baby boomers' primary buying criteria are peace of mind and luxury, while Generation X buyers -- those born from 1960 to 1977 -- seek fun and variety. Generation Y buyers, Toyota says, want to flaunt their personal style.